Occupational Choice and the Process of Development
TL;DR: In this paper, the authors model economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth, and demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long-run effects.
read more
Abstract: This paper models economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth. Because of capital market imperfections, poor agents choose working for a wage over self-employment, and wealthy agents become entrepreneurs who monitor workers. Only with sufficient inequality, however, will there be employment contracts; otherwise, there is either subsistence or self-employment. Thus, in static equilibrium, the occupational structure depends on distribution. Since the latter is itself endogenous, we demonstrate the robustness of this result by extending the model dynamically and studying examples in which initial wealth distributions have long-run effects. In one case the economy develops either widespread cottage industry (self-employment) or factory production (employment contracts), depending on the initial distribution; in the other example, it develops into prosperity or stagnation.
read more
Chat with Paper
AI Agents for this Paper
Find similar papers on Google Scholar, PubMed and Arxiv
Write a critical review of this paper
Analyze citations of this paper to find unaddressed research gaps
Citations
A dynamic model of entrepreneurship with borrowing constraints: theory and evidence
TL;DR: The authors showed that the existence of financial constraints to the creation of businesses implies a non-monotonic relationship between wealth and entry into entrepreneurship: the probability of becoming an entrepreneur as a function of wealth is increasing for low wealth levels, as predicted by standard static models, but it is decreasing for higher wealth levels.
•Posted Content
Financial Frictions and the Persistence of History: A Quantitative Exploration
TL;DR: In this article, the authors quantify the role of financial frictions and the initial misallocation of resources in explaining development dynamics and show that after a reform that triggers efficient reallocating of resources, the model economy with financial fictions converges slowly to the new steady state, taking twice as long to cover half the distance to the steady state as the neoclassical growth model.
288
Kenyan Supermarkets, Emerging Middle-Class Horticultural Farmers, and Employment Impacts on the Rural Poor
TL;DR: In this article, the authors analyzed the farm-level impact of supermarket growth on Kenya's horticulture sector, which is dominated by smallholders and revealed a threshold capital vector for entrance in the supermarket channel, which hinders small, rainfed farms.
288
Regional determinants of entrepreneurial start-ups in a developing country
TL;DR: In this article, the authors use data from a developing country, South Africa, to empirically identify the determinants of start-up rates across different sub-national regions and in particular to investigate the role of access to finance on a regional (sub-national) level on start-ups.
287
Sorting and Long-Run Inequality
TL;DR: The authors construct a dynamic model of intergenerational education acquisition, fertility, and marital sorting and parameterize the steady state to match several basic empirical endings: a negative correlation between fertility and education, a decreasing marginal effect of parental education on children's years of education, wages that are sensitive to the relative supply of skilled workers, and borrowing constraints that affect educational attainment for some low-income households.
References
Increasing Returns and Long-Run Growth
TL;DR: In this paper, the authors present a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity, which is essentially a competitive equilibrium model with endogenous technological change.
On the mechanics of economic development
TL;DR: In this article, the authors consider the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development, and compare three models and compared to evidence.
21.5K
The mechanics of economic development
Robert E. Lucas
- 01 Jan 1988
Abstract: This paper considers the prospects for constructing a neoclassical theory of growth and international trade that is consistent with some of the main features of economic development. Three models are considered and compared to evidence: a model emphasizing physical capital accumulation and technological change, a model emphasizing human capital accumulation through schooling, and a model emphasizing specialized human capital accumulation through learning-by-doing.
20.8K
Agency Costs, Net Worth, and Business Fluctuations.
Mark Gertler,Ben S. Bernanke +1 more
TL;DR: The authors developed a simple neoclassical model of the business cycle in which the condition of borrowers' balance sheets is a source of output dynamics, and the mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments.
5.5K
Income Distribution and Macroeconomics
Oded Galor,Joseph Zeira +1 more
TL;DR: The authors analyzes the role of wealth distribution in macroeconomics through investment in human capital and shows that the initial distribution of wealth affects aggregate output and investment both in the short and in the long run, as there are multiple steady states.